- Net Sales of $1.1 Billion Up 3.1% YoY; Up 3.4% on an Organic
Daily Basis
- Net Income of $93.8 Million, or $2.39 Per Share Up 21.3%
YoY
- EBITDA of $133.4 Million Up 12.3% YoY
- Operating Cash Flow of $66.2 Million; Free Cash Flow of
$61.9 Million
- Raising Fiscal 2024 Guidance
Applied Industrial Technologies (NYSE: AIT), a leading
value-added distributor and technical solutions provider of
industrial motion, fluid power, flow control, automation
technologies, and related maintenance supplies, today reported
results for its fiscal 2024 first quarter ended September 30,
2023.
Net sales for the quarter of $1.1 billion increased 3.1% over
the prior year. The change includes a 1.1% increase from
acquisitions and a 0.2% increase from foreign currency translation,
offset by a negative 1.6% impact from one less selling day.
Excluding these factors, sales increased 3.4% on an organic daily
basis reflecting a 4.7% increase in the Service Center segment and
a 0.6% increase in the Engineered Solutions segment. The Company
reported net income of $93.8 million, or $2.39 per share, and
EBITDA of $133.4 million. On a pre-tax basis, results include $4.6
million ($0.09 after tax per share) of LIFO expense compared to
$9.1 million ($0.18 after tax per share) of LIFO expense in the
prior-year period.
Neil A. Schrimsher, Applied’s President & Chief Executive
Officer, commented, “We delivered a positive start to fiscal 2024
with EBITDA and EPS growing a respective 12% and 21% over the prior
year. Considering the expected moderating sales growth environment,
these results reflect another solid quarter of operational
execution from our Applied team, including favorable margin
performance beyond LIFO expense normalization. Underlying demand
within our core Service Center segment was resilient reflecting
steady factory utilization and break-fix activity within the U.S.
industrial manufacturing sector, as well as internal sales
initiatives. In addition, secular growth tailwinds and end-market
diversification are helping balance slower activity across the
technology sector and ongoing supply chain headwinds within our
Engineered Solutions segment. We also announced two bolt-on Service
Center acquisitions during the quarter that strengthen our growth
potential along the Eastern U.S. Overall, we had a productive first
quarter that positions us to deliver solid earnings and free cash
growth in fiscal 2024.”
Mr. Schrimsher added, “We are raising fiscal 2024 guidance to
primarily reflect first quarter earnings performance, our recent
Service Center acquisitions, and lower LIFO expense assumptions. We
have yet to see any broad signs of a material demand reduction
across our end markets, though we expect sales growth will remain
muted near term as production activity and supply chains continue
to normalize. In addition, the second quarter is our most difficult
comparison for the year, as reflected in October to date sales
trending relatively unchanged on an organic basis compared to
prior-year levels. Overall, sales growth is playing out largely as
expected year to date, and we remain focused on driving industry
leading operational execution as we make further progress on our
strategic objectives. While macro uncertainty remains, we are
uniquely positioned to navigate the current environment and deliver
outsized earnings growth long term given our differentiated
industry position, leading technical capabilities, self-help margin
tailwinds, scaling automation platform, and balance sheet
capacity.”
Fiscal 2024 Guidance For fiscal 2024, the Company now
projects EPS of $9.25 to $9.80 (prior $8.80 to $9.55), sales growth
of 1% to 4% (prior 0% to 4%) including 0% to 3% on an organic daily
basis, and EBITDA margins of 12.0% to 12.3% (prior 11.9% to 12.1%).
Guidance incorporates current economic uncertainty and assumptions
of easing end-market demand near term, as well as ongoing
inflationary and supply chain headwinds. Guidance does not assume
contribution from future acquisitions.
Dividend Today the Company also announced that its Board
of Directors declared a quarterly cash dividend of $0.35 per common
share, payable on November 30, 2023, to shareholders of record on
November 15, 2023.
Conference Call Information Applied will host its
quarterly conference call for investors and analysts at 10 a.m. ET
on October 26, 2023. Neil A. Schrimsher – President & CEO, and
David K. Wells – CFO will discuss the Company's performance. A
supplemental investor presentation detailing latest quarter results
and the Company’s outlook is available for reference on the
investor relations portion of the Company’s website at
www.applied.com. To join the call, dial 800-768-2878 (toll free) or
212-231-2927 (for International callers) using conference ID
22028182. A live audio webcast can be accessed online through the
investor relations portion of the Company's website at
www.applied.com. A replay of the call will be available for two
weeks by dialing 800-633-8625 or 402-977-9141 (International) using
conference ID 22028182.
About Applied® Applied Industrial Technologies is a
leading value-added distributor and technical solutions provider of
industrial motion, fluid power, flow control, automation
technologies, and related maintenance supplies. Our leading brands,
specialized services, and comprehensive knowledge serve MRO and OEM
end users in virtually all industrial markets through our
multi-channel capabilities that provide choice, convenience, and
expertise. For more information, visit www.applied.com.
This press release contains statements that are forward-looking,
as that term is defined by the Securities and Exchange Commission
in its rules, regulations and releases. Applied intends that such
forward-looking statements be subject to the safe harbors created
thereby. Forward-looking statements are often identified by
qualifiers such as “expect,” “will,” “guidance,” “assume”,
“believe” and derivative or similar expressions. All
forward-looking statements are based on current expectations
regarding important risk factors including trends and events in the
industrial sector of the economy (such as the inflationary
environment and supply chain strains), results of operations, and
financial condition, and other risk factors identified in Applied's
most recent periodic report and other filings made with the
Securities and Exchange Commission. Accordingly, actual results may
differ materially from those expressed in the forward-looking
statements, and the making of such statements should not be
regarded as a representation by Applied or any other person that
the results expressed therein will be achieved. Applied assumes no
obligation to update publicly or revise any forward-looking
statements, whether due to new information, or events, or
otherwise.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND
SUBSIDIARIES CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited) (In thousands, except per share data)
Three Months Ended September
30,
2023
2022
Net Sales
$
1,095,188
$
1,062,405
Cost of sales
770,106
755,622
Gross Profit
325,082
306,783
Selling, distribution and administrative expense, including
depreciation
204,402
200,251
Operating Income
120,680
106,532
Interest expense, net
1,320
6,480
Other expense, net
431
1,008
Income Before Income Taxes
118,929
99,044
Income tax expense
25,103
22,164
Net Income
$
93,826
$
76,880
Net Income Per Share - Basic
$
2.42
$
2.00
Net Income Per Share - Diluted
$
2.39
$
1.97
Average Shares Outstanding - Basic
38,700
38,526
Average Shares Outstanding - Diluted
39,310
39,111
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1) Applied uses the last-in, first-out (LIFO) method of valuing
U.S. inventory. An actual valuation of inventory under the LIFO
method can only be made at the end of each year based on the
inventory levels and costs at that time. Accordingly, interim LIFO
calculations are based on management's estimates of expected
year-end inventory levels and costs and are subject to the final
year-end LIFO inventory determination.
APPLIED INDUSTRIAL
TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED
BALANCE SHEETS (Unaudited) (In thousands)
September 30,2023 June 30,2023
Assets Cash and cash
equivalents
$
360,415
$
344,036
Accounts receivable, net
694,922
708,395
Inventories
507,641
501,184
Other current assets
81,287
93,192
Total current assets
1,644,265
1,646,807
Property, net
113,704
115,041
Operating lease assets, net
102,144
100,677
Intangibles, net
237,102
235,549
Goodwill
586,478
578,418
Other assets
66,818
66,840
Total Assets
$
2,750,511
$
2,743,332
Liabilities Accounts
payable
$
259,790
$
301,685
Current portion of long-term debt
25,171
25,170
Other accrued liabilities
181,597
213,489
Total current liabilities
466,558
540,344
Long-term debt
596,883
596,926
Other liabilities
150,954
147,625
Total Liabilities
1,214,395
1,284,895
Shareholders' Equity
1,536,116
1,458,437
Total Liabilities and Shareholders' Equity
$
2,750,511
$
2,743,332
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND
SUBSIDIARIES CONDENSED STATEMENTS OF CONSOLIDATED CASH
FLOWS (Unaudited) (In thousands)
Three Months Ended September
30,
2023
2022
Cash Flows from Operating
Activities Net income
$
93,826
$
76,880
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization of property
5,717
5,481
Amortization of intangibles
7,393
7,705
Provision for losses on accounts receivable
867
3,994
Amortization of stock appreciation rights and options
844
1,424
Other share-based compensation expense
1,976
1,939
Changes in assets and liabilities, net of acquisitions
(45,245
)
(72,071
)
Other, net
831
591
Net Cash provided by Operating Activities
66,209
25,943
Cash Flows from Investing
Activities Acquisition of businesses, net of cash
acquired
(21,440
)
-
Capital expenditures
(4,340
)
(5,554
)
Proceeds from property sales
123
56
Net Cash used in Investing Activities
(25,657
)
(5,498
)
Cash Flows from Financing
Activities Long-term debt repayments
(62
)
(40,061
)
Interest rate swap settlement receipts
3,558
294
Purchases of treasury shares
-
(716
)
Dividends paid
(13,551
)
(13,100
)
Exercise of stock appreciation rights and options
-
126
Acquisition holdback payments
(562
)
(660
)
Taxes paid for shares withheld for equity awards
(11,866
)
(1,401
)
Net Cash used in Financing Activities
(22,483
)
(55,518
)
Effect of Exchange Rate Changes on Cash
(1,690
)
(1,826
)
Increase (decrease) in cash and cash equivalents
16,379
(36,899
)
Cash and Cash Equivalents at Beginning of Period
344,036
184,474
Cash and Cash Equivalents at End of Period
$
360,415
$
147,575
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND
SUBSIDIARIES SUPPLEMENTAL INFORMATIONRECONCILIATION OF GAAP
TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
(In thousands) The Company supplemented the reporting
of financial information determined under U.S. generally accepted
accounting principles (GAAP) with reporting of non-GAAP financial
measures. The Company believes that these non-GAAP measures provide
meaningful information to assist shareholders in understanding
financial results, assessing prospects for future performance, and
provide a better baseline for analyzing trends in our underlying
businesses. Because non-GAAP financial measures are not
standardized, it may not be possible to compare these financial
measures with other companies' non-GAAP financial measures having
the same or similar names. These non-GAAP financial measures should
not be considered in isolation or as a substitute for reported
results. These non-GAAP financial measures reflect an additional
way of viewing aspects of operations that, when viewed with GAAP
results, provide a more complete understanding of the business. The
Company strongly encourages investors and shareholders to review
company financial statements and publicly filed reports in their
entirety and not to rely on any single financial measure.
Reconciliation of Net Income, a GAAP financial measure, to
EBITDA, a non-GAAP financial measure:
Three Months Ended September
30,
2023
2022
Net Income
$
93,826
$
76,880
Interest expense, net
1,320
6,480
Income tax expense
25,103
22,164
Depreciation and amortization of property
5,717
5,481
Amortization of intangibles
7,393
7,705
EBITDA
$
133,359
$
118,710
The Company defines EBITDA as Earnings from operations
before Interest, Taxes, Depreciation, and Amortization, a non-GAAP
financial measure. Adjusted EBITDA excludes items that may not be
indicative of core operating results, a non-GAAP financial measure.
Reconciliation of Net Cash provided by Operating activities, a
GAAP financial measure, to Free Cash Flow, a non-GAAP financial
measure:
Three Months Ended September
30,
2023
2022
Net Cash provided by Operating Activities
$
66,209
$
25,943
Capital expenditures
(4,340
)
(5,554
)
Free Cash Flow
$
61,869
$
20,389
Free cash flow is defined as net cash provided by operating
activities less capital expenditures, a non-GAAP financial measure.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231026014229/en/
Ryan D. Cieslak Director – Investor Relations & Treasury
216-426-4887 / rcieslak@applied.com
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